Exam 10: Taxation of Corporations

The Willow Corporation reported $400,000 of taxable income.In making a conversion to book income, the accountant had to adjust for the following: a $25,000 Section 179 deduction, but book depreciation would have been $5,000; a fine of $12,500 for overweight trucks; and a net capital loss of $10,000.What is Willow Corporation's book income?

A partial liquidation occurs when only a few of a corporation's shareholders have their stock redeemed by a corporation.

A 21 percent excise tax is imposed on compensation in excess of a certain dollar amount paid to a covered employee by an exempt organization.A 1.4 percent excise tax applies to the net investment income of private colleges and university with at least 500 students and assets of at least a certain dollar amount per student.What are these dollar amounts, respectively?

Regular corporations are free to choose any fiscal or calendar year as their tax year.

Corporations are allowed a charitable contribution deduction equal to 10% of gross profit.

Soho is a personal service corporation that has $1,200,000 of gross revenue and $1,021,000 of deductible expenses? What is its income tax liability for 2019?

A large corporation had a net long-term capital loss in 2019 and net operating loss in 2019.What are the earliest year(s) to which these losses can be carried?

Fernando was a one-third shareholder in Rodriguez, Inc.prior to its liquidation in March.Fernando's basis in his Rodriguez stock was $50,000.In March, Rodriguez distributed property worth $125,000 (basis $80,000) in complete liquidation of Fernando's Rodriguez shares.Fernando took the property subject to a $30,000 liability.How much taxable gain must Fernando recognize upon receipt of the property from Rodriguez?

The outstanding stock of Riccardo Corporation is owned as follows: Robert 100 shares Megan (Robert's daughter) 100 shares Kyle (Robert's cousin) 100 shares RMD, Inc. Total shares autstanding 400 shares Robert owns 50% of RMD, Inc.stock.The rest of RMD, Inc.stock is owned by unrelated parties.Riccardo Corporation redeems 90 of Robert's shares of stock for $9,000 in the only redemption transaction this year.Robert's basis for his stock is $10 per share (100 shares @ $10 = $1,000).Riccardo Corporation has $300,000 in E&P.What is Robert's total basis in his remaining 10 shares of stock after the redemption?

The outstanding stock of Riccardo Corporation is owned as follows: Robert 100 shares Megan (Robert's daughter) 100 shares Kyle (Robert's cousin) 100 shares RMD, Inc. Total shares autstanding 400 shares Robert owns 50% of RMD, Inc.stock.The rest of RMD, Inc.stock is owned by unrelated parties.Riccardo Corporation redeems 90 of Kyle's shares of stock for $9,000 in the only redemption transaction this year.Kyle's basis for his stock is $10 per share.Riccardo Corporation has $300,000 in E&P.How much capital gain or dividend income does Kyle recognize as a result of this redemption?

Whyley Corporation, a C corporation, has gross profits on sales of $50,000 and deductible expenses of $60,000.In addition, Whyley has a net capital gain of $30,000.Whyley's taxable income is:

A corporation has pre-tax book income of $324,000.In determining this income, the corporation included $2,000 of tax-exempt interest, $6,000 of dividends from an affiliated corporation, a capital loss of $50,000 and $3,000 of excess book depreciation.What is the corporation's taxable income?

What is the amount of the exemption an exempt organization is permitted for unrelated business income?

Maui Corporation makes two distributions during the current tax year: the first for $20,000 on February 1 and the second for $30,000 on August 1.Before consideration of the distributions, the corporation has $18,000 in current earnings and profits and $21,000 of accumulated earnings and profits.How much of the first distribution is taxable to the shareholders as a dividend?

A sole shareholder receives a piece of land from a corporation as a dividend distribution.The land has a basis of $40,000 and a fair market value of $80,000; the shareholder's basis in his stock is $20,000, and this distribution is the only corporate activity for the year except for paying any tax owed on the land distribution.At the beginning of the year, the corporation had only $5,000 in accumulated earnings and profits.How will this distribution be treated for tax purposes by the shareholder?

An exempt organization normally operates as a:

The outstanding stock of Riccardo Corporation is owned as follows: Robert 100 shares Megan (Robert's daughter) 100 shares Kyle (Robert's cousin) 100 shares RMD, Inc. Total shares autstanding 400 shares Robert owns 50% of RMD, Inc.stock.The rest of RMD, Inc.stock is owned by unrelated parties.Riccardo Corporation redeems 90 of Robert's shares of stock for $9,000 in the only redemption transaction this year.Robert's basis for his stock is $10 per share (100 shares @ $10 = $1,000).Riccardo Corporation has $300,000 in E&P.How much capital gain or dividend income does Robert recognize as a result of this redemption?

Cloud Corporation has a taxable income of $100,000 in 2019 along with a $30,000 general business credit.What is the amount of its credit carryover and the last year to which the carryover could be used?

What is the minimum number of individuals who must own a corporation for it to avoid meeting the personal holding company designation?

Which of the following is an indication of the accumulation of earnings and profits beyond the reasonable needs of the business?